IMF Projecting Worst Recession Since the Great Depression

WASHINGTON, DC – The world has changed dramatically over the past three months, according to the latest World Economic Outlook from the International Monetary Fund (IMF). The coronavirus pandemic, has countries implementing quarantines and social distancing practices to contain the outbreak. The result is a world in a Great Lockdown. The magnitude and speed of collapse in the activity that has followed is unlike anything experienced in our lifetimes. Under the assumption that the pandemic peaks in the second quarter for most countries in the world, and recedes in the second half of this year, the IMF is projecting global growth to fall to -3 percent. This is a downgrade of 6.3 percentage points from the January Outlook which represents a major revision over a very short period. This also makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis just ten years ago.

Assuming the pandemic fades in the second half of 2020 and that any policy actions that are taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, the IMF projects global growth next year to rebound to 5.8 percent. The recovery in 2021 is only partial as the level of economic activity is projected to remain below the level previously projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.